RR UK (South) Limited v Firstsource Solutions UK Limited [2026] EWHC 1210 (Ch)
[1]This is my judgment on a preliminary point but which potentially has a very significant impact upon the progression of this trial under the Shorter Trials Scheme.[2]By way of brief background, C is the present freehold proprietor of commercial premises in Derby which were let to D under a lease commencing on 16 December 2019 and expiring on 1 November 2028. The lease contained a break clause which was conditional upon payment by D of all sums due under the lease on or before the break date. D made a payment of £95,111.40 in respect of service charges for the period from 25 December 2023 to 24 March 2024, but C never received payment. This was because the email address of C’s managing agent had been hacked by a fraudster who sent altered payment instructions to D which then made payments to the fraudster’s bank account.[3]By a written notice dated 14 June 2024, D purported to exercise the break clause and end the lease on 16 December 2024. It is common ground that there must be strict compliance with break clause conditions so that any arrears will result in the non-operation of a break clause and the lease will continue. It is also common ground that if the payment to the fraudster is not accounted for in the summary of arrears, then there will have been arrears as at 16 December 2024 and the lease continues even if D is successful in its alternative construction argument that it is entitled, under the terms of the lease, to set off the rebate for electricity charges.[4]The preliminary point that I must decide is whether D is permitted to run an argument at trial that the payment it made to the fraudster was a good payment in law in circumstances where it was made following instructions received from C’s agent’s email address such that D had no reason to believe that it was not engaging with C’s appointed agent and that the payment instructions did not flow from his apparent authority on behalf of C.[5]It is not in dispute that, in its defence and counterclaim, D simply asserts that the payment to the fraudster has not been credited to D and is not reflected in the schedule of arrears. No positive case is advanced on what legal basis a payment to a fraudster is nevertheless a good payment to C where both C and D were innocent victims of that fraud.[6]It is argued on behalf of D that the issue has however been adequately raised by C in its reply and defence to counterclaim. However, C’s reply and defence to counterclaim simply asserts that, as a matter of fact and law, no payment was made by D to C or its agent. In such circumstances, D chose not to file a reply to the defence to counterclaim and so has still not pleaded a positive case, whether by apparent authority, negligence, implied term or otherwise. D has made no application to amend its statement of case.[7]In the absence of any positive case having been pleaded, it is perhaps unsurprising that the list of issues agreed between the parties and approved by the judge at the CMC on 20 May 2025 failed to make any reference to the agency issue. The only reference is whether the sum of £95,111.40 was received by C from D, which it is now conceded as a matter of fact was not received by C.[8]The CMC order directed disclosure and witness statements expressly by reference to the list of issues. The claim was stayed until 1 September 2025 for the purposes of mediation. By an order dated 6 August 2025 and in the event that settlement had not been reached, I directed C’s solicitors to file for approval, agreed directions varying the timetable as previously ordered. The parties agreed directions which were approved by the court on 11 September 2025 and which directed that the trial take place on the first available date after 28 January 2026. The list of issues referred to and annexed to that order was in the same form as the list of issues referred to and annexed to the earlier CMC order.[9]The pre-trial review hearing due to be heard on 23 March 2026 was vacated upon the parties having agreed that no substantive issues arose for determination at the PTR and as confirmed in the agreed case summary.[10]The agreed case summary again referred to it being C’s case that, both factually and as a matter of law, no payment was made by D to C or its agent. The case summary makes no reference to any positive case being raised by D in that regard.[11]The Shorter Trials Scheme is intended to promote proportionality in accordance with the overriding objective by expediting and reducing the costs of the litigation. However, the abridged procedures are not an excuse for cutting corners in a manner which conflicts with the countervailing requirement of the overriding objective of dealing with cases justly.[12]As I say, there is no application by D to amend its statement of case. Therefore I consider that, in substance, I am being asked to approve a revision to the list of issues mandated by Practice Direction 57AB in order to permit D to advance a positive case not previously pleaded. That is ultimately the exercise of a case management decision which must be exercised in accordance with the overriding objective of dealing with the case justly and at proportionate cost. The court must further the overriding objective by actively managing cases, which includes identifying the issues at an early stage. The parties are required to help the court to further the overriding objective.[13]In the present case, the parties identified and the court approved the list of issues at an early stage. If I decline to approve the revision now sought by D to the list of issues, it will no doubt suffer significant prejudice in that it will be deprived of the opportunity of arguing the agency point and the lease will continue, thereby imposing substantial liabilities upon D. However, D has had repeated opportunities to seek this revision before now but chose not to do so. No explanation has been given for that inordinate delay. If I approve the revision to the list of issues, C will suffer significant prejudice in that, through no fault of its own, it will have been deprived of the opportunity of putting in evidence to respond to the agency point, which is a matter of both fact and law requiring different disclosure and witness evidence to that already provided.[14]In all the circumstances, I decline to approve the proposed revision to the list of issues, which in my judgment would be wholly contrary to the overriding objective. As a consequence, D is not permitted to advance any positive case in relation to the payment to the fraudster, whether by way of agency or otherwise, and that concludes my judgment. Digital Transcription by Marten Walsh Cherer Ltd 2nd Floor, Quality House, 6-9 Quality Court, Chancery Lane, London WC2A 1HP Tel No: 020 7067 2900. DX: 410 LDE Email: info@martenwalshcherer.com Web: www.martenwalshcherer.com